Judgement: VODAFONE CASE

This case was regarding the dispute between vodafone group and the income tax authorities on the fact that vodafone international holdings acquired entire share capital for cgp internationals from hutchison telecommunications international ltd for $ qq billion through various intermediate companies and thus controlled 67% oh hutchison essar ltd.

This acquisition resulted in vodafone acquiring over control over hutch essar – a joint venture. The sale was supposed to be done overseas, no taxes were paid in India.

It authorities contented that since 67% of the shares were acquired therefore they are obliged under section 9(1) of income tax act 1961. So they are supposed to pay tax in India before making payment to hutchinson.

ISSUES

WHETHER VODAFONE WAS LIABLE TO PAY THE TAX?

WHETHER THEIR WAS A NECESSITY IN LIFTING OF CORPORATE VEIL.

JUDGEMENT.

Vodafone said that neither vodafone nor hutch was liable to pay tax as both the companies were located outside India and deal happened outside the country

Vodafone thus filed a writ petition in Bombay high court challenging the jurisdiction.

In 2008 the Bombay high court held that the transaction was one of the capital assets transfers.

The apex court held that there was no merit in the high court’s verdict.it was a share transfer and not capital asset transfer. The judgement did not distinguish between shareholding and pure financial investment. The judgement made it clear that to emphasize that a subsidiary company has an identity that is distinct from its parent holding company.